Fox, Affiliates Reach Accord on Football Costs

After drawn-out negotiations, Fox Broadcasting Co. has reached an agreement with its affiliate board to share the costs of the network’s new $4.5-billion contract with the National Football League.

Under the pact, which must still be accepted by individual stations, the affiliates would contribute roughly $25 million a year in cash equivalents and are expected to hand over another $25 million in revenues from the local sales of advertising spots that previously were sold nationally by Fox. Local advertisers typically pay higher rates, so Fox is transferring some of its inventory to its affiliates to reap added value.

Fox had expected to raise between $40 million and $50 million a year from its affiliates for football, an increase from the $30 million a year contributed under the network’s previous contract.

While affiliates rarely help shoulder programming costs, the networks are increasingly pressuring affiliates to chip in because of the unprecedented prices for sports and top-rated prime-time programming. CBS’ affiliates agreed in June to contribute between $40 million and $50 million to that network’s new football contract. ABC failed in an attempt to get affiliates to cough up money for the return of Monday Night football.

Cost-sharing is not unusual at Fox. Unlike CBS, NBC and ABC, Fox does not pay its affiliates compensation for airing its programming, convincing stations to relinquish it several years ago to enable the network to step up its investment in programming in a bid to improve ratings.

Affiliates also helped finance a block of children’s programming and share in the profit.

Under the new football agreement, the affiliates will forfeit to Fox for the next five years $20 million a year of their shared profits from children’s programming. Similarly, they will allow Fox to keep the money it owes them for forfeiting to the network their so-called retransmission rights with cable operators.

Fox gave cable operators the ability to transmit the local signals of its affiliates in exchange for carriage of FX, a general entertainment channel owned by Fox’s parent company, News Corp.

Larry Jacobson, president of Fox Television Network, said retransmission funds add $5 million a year to the deal.

Fox’s protracted negotiations with its affiliates over the deal were a surprise because they have a history of cooperation. But the affiliates tried to use their leverage with football to extract other concessions.

In particular, affiliates were pushing for promises from the network that programming would be theirs to run exclusively for a specified period of time. Affiliates are worried the networks will look to repackage their programming for cable as a way to squeeze more value from their rising investments and to offset an erosion in their audience by alternative entertainment choices.

CBS affiliates tied their contributions to football to one-year guarantees of exclusivity.

But Fox affiliates ultimately agreed to defer the issue.